“The agencies have significant safety and soundness concerns with respect to business models that are concentrated in crypto-asset activities or have concentrated exposures to the crypto-asset sector“, the regulators detailed.
U.S. regulators warn of risks associated with crypto-currencies.
The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a joint statement Tuesday on the risks of cryptocurrencies to banking organizations.
They explained that the events of the past year have shown “significant volatility and exposure of vulnerabilities in the cryptoasset sector.“Regulators have named numerous risks, including fraud and scams, legal uncertainties, misrepresentations by crypto-currency companies, significant volatility in the crypto-currency markets, execution risks and contagion risks. “It is important that risks in the cryptoasset industry that cannot be mitigated or controlled do not migrate to the banking system“, the joint statement emphasizes.
“Based on their current understanding and experience to date, the Agencies believe that the issuance or proprietary holding of crypto-assets issued, stored, or transferred on an open, public, and/or decentralized network, or similar system, is most likely inconsistent with safe and sound banking practices“, the statement continued, adding:
The agencies have significant safety and soundness concerns with respect to business models that are concentrated in crypto-asset activities or have concentrated exposures to the crypto-asset sector.
The Federal Reserve, FDIC and OCC noted that they “will continue to closely monitor banking organizations’ exposures related to crypto-assets“, concluding:
Banking organizations must ensure appropriate risk management, including board oversight, policies, procedures, risk assessments, controls, barriers and safeguards, and monitoring, to effectively identify and manage risks.